DFW SBLO Council SBA Part I: Subcontracting 101

November 18, 2013

U.S. Small Business Administration

Public Law 95-507 enacted by Congress in 1978 amended the Small Business Act, Section 8(d)

This law is implemented thru the following regulations:

SBA’s regulations: 13 CFR 125.3 Federal Acquisition Regulation (FAR): 19.7 and the related clauses, especially 52.219-8 and 52.219-9 Agency Supplements to the FAR such as GSA’s GSAM and DoD’s DFARS

Small Business (SB) - negotiable Small Disadvantaged Business (SDB) - 5% Women-Owned Small Business (WOSB) - 5% HUBZone Small Business - 3% Veteran-Owned Small Business (VOSB) -

negotiable Service-Disabled Veteran-Owned (SD/VOSB) - 3%

Note: The statutory 23% Government-wide goal for small business does not apply to subcontracting plans.

Dollar Threshold: The contract or contract mod is expected to exceed $650,000 ($1,500,000 for construction)

Subcontracting possibilities: The contract appears to offer subcontracting possibilities

Note: Subcontracting plans are not required from small businesses!

Individual Contract Plan Applies to a specific contract and covers the entire period of the contract, even if it crosses fiscal years.

Commercial Plan (also called a company-wide plan) Applies to all commercial items sold by either the entire company or a portion of it, such a division. A commercial plan is always based on the company’s fiscal year.

Master Plan Contains all of the elements of an Individual Contract Plan except goals.

Comprehensive Subcontracting Plan: DoD Test Program, DFARS 219.702, expires

Dec. 31, 2014 Annual plan Government fiscal year Corporate, plant, or division basis DCMA administers program Contains required elements (FAR 19.704) Submit one SSR for DoD, no ISRs

A subcontracting plan must contain goals expressed in both dollars and percentages.

Other required elements are set forth in the FAR at subpart 19.704 and in the clause at 52.219-9.

SBA provides a Fact Sheet on subcontracting that explains goals, flow-down, and reporting requirements. (This Fact Sheet is Appendix B of SBA’s SBLO Handbook.)

Each contract should have only one subcontracting plan FAR 52.219-9(i)

DoD Task Order plans

◦ DFARS 219.704 provides statutory deviation (DoD Class

Deviation 2008-O0008) to allow DoD contractors to use standard form 294 (SF 294) in lieu of eSRS

A subcontracting plan must include a statement that the prime contractor will require all subcontractors (except small businesses) that receive subcontracts in excess of $650,000 ($1.5 million in construction) to adopt a subcontracting plan that complies with the requirements of FAR clause 52.219-9. Note: You may be exempt from this requirement if your contract

contains the FAR clause at either 52.212-5 or 52.244-6.

The NAICS (North American Industry Classification System) code of the subcontract determines the size standard.

Go to www.sba.gov/size and click on “Table of Size Standards.”

The prime contractor is responsible for determining the NAICS code and the size standard for the subcontract.

Regulation:13 CFR 121.410 & 121.411; also 121.404(e)

Size Contractors must be small for the NAICS

code of the subcontract Subcontractors include suppliers, vendors,

and subcontractors (anyone you spend money with).

Subcontractors could be small for one subcontract, and large for another

Size at time of size self-certification with subcontract is size for LIFE of subcontract

Section 8(d) of the Small Business Act allows prime contractors acting in good-faith to obtain “written representations” (self-certifications) from their subcontractors and suppliers.

This rule applies to all suppliers except HUBZone firms, which must be certified by SBA.

Verify HUBZone certifications in SAM or DSBS www.SAM.gov or http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm

Who to count? Primes must collect written size certifications Goal Categories

Small Business – self-certifying* SDB – self-certifying* WOSB – self-certifying HUBZone – SBA certified VOSB – self-certifying SDVOSB – self-certifying

*ANCs and Indian Tribes are counted as SB and SDB in subcontracting plans/reports * For DOD contracts, NIB/NISH counted toward SB

Known as the Electronic Subcontract Reporting System, or “eSRS.”

It became operational in October 2005. The eSRS is now a Government-wide system used by both DoD

and civilian agencies. All prime contractors with subcontracting plans are required to

use the eSRS to file their Summary Subcontract Report (SSR) at the end of the year.

Most prime contractors also use the eSRS to file their Individual Subcontract Reports (ISR) semi-annually.

How will your performance affect your company? ◦ Liquidated Damages FAR 19.705-7 and 52.219-16 Amount is equal to the actual dollar amount by which the

contractor failed to achieve each subcontracting goal. ◦ Subcontracting Plan Incentives FAR clauses 52.219-10 and 52.219-26 Incentive ranges from 0 to 10% of the amount by which the

contractor exceeded its goal or goals. ◦ Past Performance

When a contractor fails to make a good-faith effort to comply with a subcontracting plan, Federal law mandates that liquidated damages be paid to the Government.

The amount of damages shall be equal to the actual dollar amount by which the contractor failed to achieve each goal.

Pre-Award Subcontracting Plan Reviews SBA’s Procurement Center Representatives (PCRs) review subcontracting plans prior to contract award (SBA’s comments at this point are advisory)

Post-Award Compliance Reviews SBA’s Commercial Market Representatives (CMRs) monitor goal achievement after contract award by means of desk reviews and on-site compliance reviews

SBA Can: Conduct compliance reviews and SOARS

(Subcontracting Orientation and Assistance Reviews)

SBA Cannot: Prescribe the amount of subcontracting Require the prime contractor to use a particular

small business

Compliance Policy statement from CEO/President Training of buyers/ Buyer Awareness Outreach/success stories Goal attainment/eSRS reporting Correct classification of subcontractors Justification for Subcontracts < $150,000 Subcontracting Plan Flow Down Subcontract>

$650,000 to a large business FAR 52.212-5(e) or FAR 52.244-6(c)

SBA’s CMRs SBA’sDynamic Small

Business Search (DSBS) (now with Quick Market Search)

SUB-Net: A web site for prime contractors to post subcontracting opportunities

Open your Internet Browser and find http://web.sba.gov/subnet/; or

From the FedBizOpps Home Page (http://www.fbo.gov), click on the SUB-Net hyperlink on the right-hand side of the screen.

Open your Internet Browser and find http://www.sba.gov/GC/

Click on “Contacts and Representatives” on the right-hand menu bar ◦ Click on “SBA’s Government Contracting Field Staff

Directory” (3rd menu item in the middle of the screen)

Robert C. Taylor

Area Director for Government Contracting, Area V U.S. Small Business Administration (SBA) Fort Worth, Texas Area V: Arkansas, Colorado, Louisiana, New Mexico, Oklahoma, and Texas robert.c.taylor@sba.gov (817) 684-5302